Drought, city pensions and new projects for downtown Santa Barbara were just some of the topics covered Tuesday morning by speakers at the 14th annual State of the City Breakfast, and several hundred people packed into Fess Parker's DoubleTree Resort to hear the update.

Because 2013 marked the driest year on record, the city is asking residents to conserve water by at least 20 percent. To help do that, the city is offering free consultations with water department staff to help residents find ways to conserve at their homes and businesses.

Landscaping accounts for about half of the city's water usage, and "some of you represent a lot of water," Schneider told the audience, encouraging business owners to work toward water reductions.

Other highlights include development downtown, including the opening of the New Vic Theater, which has helped complete the city's cultural arts district. Across the street, a public market and condos are also close to completion.

Several streets over is the city's library, which is undergoing fundraising for a new children's area as well as a redesign of its outdoor plaza "to make it more open and welcoming," Schneider said.

The city's Coffee with a Cop program as well as the Community Policing Office on the Eastside are among the police efforts that have flourished, she said, and beat coordinators continue to work downtown and in neighborhoods to check in with businesses.

On the waterfront, the Cabrillo Bathhouse, built in 1926, will get an update that will return it to its original status as the "Gem of Cabrillo Boulevard," Schneider said.

The La Entrada Project on lower State Street has seen significant progress, "believe it or not," Schneider said, adding that the developer is expected to submit plans for building permits this spring.

City Administrator Jim Armstrong also spoke, saying the city's transient occupancy tax revenue is up 14 percent since the beginning of the year, and that retail sales, while slower, have still been strong.

Armstrong said the city has been cautious about spending and controlling costs of salaries and benefits, and had recently reached an agreement with the police union to have officers contribute more to their pensions.

The city finished with a surplus of $3.4 million last fiscal year, which will help restore reserves to a healthy level, according to Armstrong.

"Your city government continues to be in good financial condition," he said.

An infrastructure funding gap exists, and the city still has a critical backlog of projects with no identified source of funding.

Armstrong said large pension liabilities are also a problem, and the city is facing about $255 million in unfunded liabilities.

That deficit isn't catastrophic for the city, he said, but it "will have a major impact on infrastructure."

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